Most companies want to understand their customers. Many of them conduct market research to ask their customers about their preferences, prices they would be prepared to pay, or their experiences of the brand.

The only problem is that some of this research just can’t be trusted.

Let’s look at price research first. Asking the customer ‘what would you be prepared to pay?’

Two researchers, Jerod Penn and Wuyang Hu[1], conducted a meta-analysis of 132 studies that asked hypothetical questions about prices and then created scenarios similar to real life - such as mock stores where the subjects spent their own money - to compare actual behaviour. What they found was that when asked the hypothetical question the subjects said they would pay around twice as much as they actually do.

We see similar inaccuracies in political polling. For example, in the UK 2015 General Election the polls forecast no overall winner but the Conservatives actually ended up with a clear majority. In the 2016 US election the average of the polls got the overall result right for the popular vote, but were wildly wrong forecasting the individual states.

This isn’t really a surprise.

Research about past events (‘How good was our service?’) should be fairly accurate because we are asking our customers to recall something that actually happened and to describe their experience.

When we ask customers about what they would do - whether that’s the price they would pay, whether they would use a particular product or service, or even if they would recommend us - we are asking them to imagine themselves in the future. When anyone does that they imagine an idealised version of themselves. In their heads the dialogue goes like this: yes, of course I would buy the environmentally friendly version; yes, of course I would pay extra for that premium solution; yes, of course I would recommend you to anyone who asked.

But when that customer gets to the real situation a million other factors influence their decision, and they do something different.

In one interesting piece of research householders in America were asked what would make them recycle more. They were given four options, which went along the lines of: one, to save the planet, two, for our children, three, to save money, or four, because the neighbours are doing it. Everyone surveyed said one of the first three would motivate them, no one said the fourth would. But when actual behaviours were measured, the only factor that had any influence was what the neighbours were doing!

Who cares about fake news - as marketers it’s fake views that we have to worry about!

So what do we do about it?

Well, one easy solution might be to divide any price research by two!

More seriously, there are a couple of ways to improve research.

First, ask comparative questions. For example, don’t ask whether the customer would buy product A or service X; instead, ask them if they would be more or less likely to buy product A than product B, or service X than service Y. It’s much easier for someone to imagine how they would react in one scenario compared to another, than to imagine a scenario in isolation. So the smart thing to do would be to give your customers a series of A vs B, B vs C and C vs A questions to get a clear idea of how attractive a product or service is compared to everything else.

Of course, this is exactly the same for pricing questions.

Second, ask what is called a certainty follow-up. In Penn and Hu’s study, asking the study participant to rate their level of certainty about a given response improved accuracy tremendously, reducing the difference between the survey and the observed behaviour by 99%.

Or you could simply do what the fake news does and just make it up! (Hint - that was a fake view!!)

You have a great website. It meets your goals, whatever they are, and supports your strategy. All you need is traffic, and SEO will take care of that, right?

Maybe.

There are a few reasons why you will want to consider Pay Per Click (PPC) advertising, such as Google AdWords or Bing Ads.

The most basic reason to use PPC is to drive traffic to your website. If you sell online (e-commerce) then you want to drive [profitable] sales. The word ‘profitable’ is in parentheses because that isn’t always the objective, but more on that later.

Imagine you have just launched your e-commerce website or have just launched a new product on your existing website. You want anyone searching for that product to find your website rather than your competition. Good SEO will help to ensure Google ranks the page for that product highly, but that takes time and these days Google likes to put a few ads at the top of the search results, pushing organic results below the fold. So one reason t use PPC is to drive immediate traffic to your page.

How do you make sure your PPC is profitable? Well, you want:

Imp x CTR x Conv Rate x AOV x ANM > Imp x CTR x CPC

In other words, to make a profit (the number of impressions) times (the clickthrough rate) times (the conversion rate) times (the average order value) times (your average net margin) should be greater than (the number of impressions) times (the clickthrough rate) times (the cost per click). What this means is that if your total net margin is greater than your total net costs then you will make a profit.

You can cancel Imp and CTR from each side to simplify:

Conv Rate x AOV x ANM > CPC

This equation assumes that each customer transaction is individual, and you have to win the customer all over again the next time they are in the market. If, once you have won a customer, they stay with you then instead of AOV you should substitute the Average Lifetime Value for the customer.

If it’s going to cost more to get the click than the net margin you make (per transaction or per lifetime value) then perhaps PPC is not the right approach.

Which brings me neatly to the reason why ‘profitable’ sales is not always the objective, and a second purpose for PPC - research, especially keyword research.

SEO works but it takes time for your product or page to get to the top of search results, and you might need instant impact. If you rely on Google Analytics you’ll find that although it provides a lot of information it also anonymises certain data, including a lot of the keywords used to land on your page. These limitations make it challenging, in the early days of promoting your product or service online, to understanding which keywords are working best, or which page descriptions generate clicks, or which landing pages are optimal.

As soon as you get your wallet out and use AdWords, Google gives you more data, including exactly which keywords and ads generate clicks and which convert. You also get to see which negative keywords are driving traffic you don’t want. This means you might want to use PPC at a loss as a relatively low cost research tool to rapidly optimise your SEO.

In fact, as a general point, you should consider PPC and SEO as tightly integrated activities which work best when they are working together.

Finally, another reason might simply be to maximise visitors because the value of your business is tied in some way to the size of your database, and even loss making traffic adds value to your business and you are planning to sell.

Google AdWords is an incredibly powerful marketing tool which every marketer should be familiar with.

Last week Google announced a number of significant changes to AdWords. The big driver behind these changes is mobile - Google says that users talk about their smartphone as being ‘attached to my hip’, being a ‘butler’ or a ‘lifeline’. In other words, mobile is becoming more and more important and Google has revamped AdWords to recognise this.

New Text Ads

Earlier this year Google removed the text ad column down the right hand side of the search page. This was done to make text ads more consistent across devices, and clearly prepared the ground for these new changes.

Now Google is changing how the ads look so that they are optimised for mobile devices.

We’re all used to the standard format for a text ad: 25 character title, two description lines of 35 characters, a display URL of 35 characters. So what are they changing to? TWO 30 character headlines, ONE consolidated 80 character description, and a display URL extracted from your real URL but with a customisable URL path.

So the ads are changing from something like this:

To this:

Google reckons that this could lead to a 20% improvement in clickthrough rates.

Local Search Ads Appearing in Google Maps

Fortunately this should not mean disruptive ads plastered across Google Maps.

What it does mean is that businesses that have ads with local extensions will be featured more strongly on maps, such as displaying a logo to indicate a location as well as the pin symbol. A bar below the map could show things like the user satisfaction ratings and a special offer, and tapping on the ad would take you to more information.

Image from Google blog

Coupled to the local search ads, Google has the ability to measure in-store conversions and has improved local business pages, so the ‘local’ aspect of AdWords is improving dramatically. In store conversions can simply be measured by looking at the phone location history to see whether they searched for an ad before going into the store to buy.

Responsive Display Ads

Display ads also get some key improvements to make them more mobile friendly. For a startoff, they will all be fully responsive, so there is no need to create a whole host of different ad shapes (tall, wide, square etc).

They will look like this:

Image from Google blog

Creating them has also been simplified. Just provide headlines, a description, an image and a URL and Google does the rest.

Mobile Device Bidding

It used to be the case that you set your bid for a desktop device, and could then adjust the bid for mobile or tablet devices. To simplify this and allow you to focus on the device type that is most important to you, you can now set separate bids for each or choose which of the three device types will be the default and then adjust the bid relative to that for the other two devices.

In addition, bid adjustments can now be up to +900%.

What Next?

So when will these changes appear? Google says ‘later this year’, and given that we’re not far away from half way through the year already (where does it all go?) it won’t be long before you see these changes.

Hands up who hasn’t heard of the 4Ps of marketing? If you are in business you have almost certainly come across Product, Price, Place and Promotion. This is a simple mnemonic to help a business consider how to go to market with its particular tangible product or service.

If you deal directly with customers or clients then I want to introduce another way to look at how you go to market - the 4Cs.

We’ll use an example to illustrate the 4Cs. Let’s say you are looking for a new accountant. What are the key criteria that you would use to choose between one potential supplier and another? Well, you might look at their fees, services, testimonials, the size of the firm, whether you would be dealing with a principal of the organisation or someone more junior, etc.

Every time I have asked anyone to list these criteria I have found that they break down into four core concepts.

COST - one way or another, the cost of the service will come into the equation. This covers fees, value for money, lifetime value, etc.

COMPETENCE - can they do what they say they can do? If the decision is about a product, does it work and meet the required spec? If it is a marketing agency, does the quality of their work meet your needs?

CONTROL - they do what you expect them to do, when you expect them to do it, and keep you informed through appropriate communications and reports.

CHEMISTRY - the relationship with them.

You could consider the first three ‘C’s, Cost, Competence and Control, to be hygiene factors. A supplier of products or services has to get these right just to be in the game. If that’s the case then Chemistry is the key differentiator. It’s all about the relationships, about the personality of the business, how you deal with your customers and how you connect with them. This is what helps you to win business, and it is certainly what helps you to retain it.

Let’s illustrate this with a quick anecdote. A friend runs a software business which competes with major multinationals. They went to a new client meeting recently, and rather than stay in the Hilton on the edge of town they stayed in a pub in the centre quite close to the meeting place. In the morning as they met in reception the first question they were asked was ‘where did you stay last night’, and when they explained the client team started to chat about how nice the pub was, how much they liked the beer, etc. Before they had even got into the meeting room the ice was broken and they had started to build a relationship. Their competitor, going into the same meeting a day later, simply answered ‘the Hilton’ and no conversation ensued. My friend got the business. Was it all down to that ice breaker? Of course not, but that helped to start the relationship, and the client unconsciously started looking for reasons to choose them as their supplier.

Are the 4 Cs just for service businesses or those selling bespoke products? Of course not. An eCommerce client, selling a commodity product with no differentiation in product range or pricing, is winning business through the help it provides, the friendliness of its team on the phone, their flexibility - every single touch point with the customer expresses the personality of the business, and the customer decides if it is a business they want to deal with.

So, you might not have been a fan of Chemistry at school, but ignore it at your peril within business.

Businesses these days are getting better and better at understanding bad news. If they lose a customer, they will visit them to ask why, what they could have done better and who has replaced them. If they lose a pitch they will ring the prospective customer to find out why they lost. Bad news deserves investigation to make sure whatever happened isn’t repeated; companies are learning from their mistakes.

It’s a curious thing, though: it often doesn’t happen the other way round. Businesses can be incredibly complacent about good news.

I recently supported pitches for two different clients, each of whom had identified potential suppliers. In both cases the potential suppliers had received specs and proposals, and I had had a conversation with them to brief them.

Following the pitches each client decided on the supplier they liked. In both cases the losing suppliers called me soon afterwards to find out why they were unsuccessful. Had they misunderstood the technical aspects of the proposal? Were they too expensive? Was it a lack of chemistry?

However, in neither case did the winning supplier ask why they had won. Why not? Perhaps they were technically strong in a way that would be a clear USP? Perhaps they had won on price - if so, by how much? Are they giving business away too cheaply?

Think about Sherlock Holmes’s observation: "The curious incident of the dog in the night-time."; "The dog did nothing in the night-time."; "That was the curious incident," remarked Sherlock Holmes.

A business needs to be just as curious about its successes as failures, to use the knowledge gained to make the company even better, and to exploit its strengths as much as possible.

Concorde - the sunk cost fallacyI have two pieces of advice today. The first has been prompted by a client I am currently working with…

How many times have we heard it? “We’ve invested too much in this project (or product, or service, or campaign – just delete as applicable!) to throw it all away. We know it’s no good and doesn’t do what we wanted, but we can’t waste all that money so we must carry on”. My client knows that their new website development is going horribly wrong and it would be better to start afresh, but can’t bring themselves to accept the fact.

This attitude is so pervasive that it even has a nickname, The Concord Effect, after the supersonic plane whose development was continued under two governments even though it became clear very early on that it would never be economic.

In many ways this seems a perfectly reasonable attitude. No one likes waste, and to stop something after lots of money has been poured into it seems very wasteful. This is particularly so with public projects where the scrutiny is severe, but businesses act in just the same way. Plus, there are some less than rational reasons for acting in this way, not least of which is the desire not to lose face or credibility. People can get very emotionally attached to pet projects.

In fact, at any point in time, the money and resource that has gone into a project (or product etc) is gone. It has been spent, it has been used up, it cannot be recovered. The only thing that matters is ‘what is the most rational decision to make going forward’. If something has to be thrown away and the project started again, then so be it.

The question that the business must answer is this: given the assets, the financial resources, time available and the human resources available to the business right now, where should they be focused? Note that the assets do include whatever has been developed so far in the project. If the answer is that the business will be better off starting afresh, then you have to be brave enough to take that decision.

Funnily enough, this particular error is not one that very young children or other primates make. They treat any decision as a new decision, and don’t worry about what has happened in the past.

Can you make as good a decision as your children?

My strong advice is that, whenever you are making important decisions about any project/product/service, you challenge yourself as to whether you are making the sunk cost fallacy.

And the other bit of advice? Last weekend I played hockey and the ball was hit onto my left hand from 5 metres with considerable force. Typing has just become an interesting challenge. The advice is, if you are going to play rough sports, wear padding – and lots of it!

1. Factual/Immediate – learning data and facts, as one does at school or from a book. The information is immediately learned, but might also be as quickly forgotten! If the information is frequently used then it more easily remembered.

2. Gradual – progressive learning of a skill or process, e.g. the way a professional chef slices vegetables. Anyone who sees it can immediately do it VERY slowly and VERY carefully, but with practice will get incrementally better. Because of the continuous practice the skill becomes deeply ingrained.

3. Discontinuous – abrupt learning of a skill, e.g. riding a bike or learning to juggle. You can see it demonstrated but can’t do it, you have to try again and again, and then suddenly something clicks and you’ve mastered it. Then gradual progressive learning takes over as you build and improve the skill.

So, what does this mean to a business?

Discontinuous learning requires a safe environment where you can repeatedly make mistakes until you get it right. When you do get it right you take a big leap forward in competence. For example, a few years ago I taught myself to juggle; one ball and then two balls is easy, getting to three is extremely hard and took a week of dropping them in a room with plenty of space and no breakables. But then, one day, quite suddenly I caught the third and did a proper juggle. I immediately did it again, then again, and within minutes started to improve how long I could keep them in the air – gradual learning had taken over.

How many businesses allow their teams to try something new and fail? Are failures treated as a chance to learn, or the opportunity to blame someone? If businesses had environments where repeated trial and error was not only possible but promoted, would more businesses make massive breakthoughs into entirely new territory?

A safe environment means two things. First, your teams have the space, time and permission to try things that might not work, they are doing so with the support and encouragement of the company, and they don’t get blamed if ideas don’t work. And second, the business supports and trials these ideas in a controlled way that doesn’t put the rest of the business at risk.